PayPal to Acquire VeriSign's Payment Gateway Business

eBay (www.eBay.com) and VeriSign (www.verisign.com) announced a strategic alliance that calls for the two companies to collaborate on payment services and security initiatives for e-commerce. Under the terms of the agreements, PayPal, an eBay company, will acquire VeriSign's payment gateway business and combine it with PayPal's leading merchant services platform.

VeriSign will also provide eBay and PayPal with a suite of security services that includes the deployment of two-factor authentication, a security system that gives customers a one-time password or digital certificate to help protect against online identity theft.

With the acquisition of VeriSign's payment gateway, which processed more than $40 billion in total payment volume in 2004, PayPal plans to accelerate its merchant services business by expanding its customer base to tens of thousands of new small and medium-sized business customers online.

Additionally, eBay and VeriSign have signed a multi-year security technology agreement that calls for eBay to invest in the deployment of VeriSign technologies that enable and protect online transactions, including the purchase of up to one million two-factor authentication tokens.

eBay and PayPal plan to begin the rollout of two-factor authentication to customers in 2006, including marketing and security programs designed to promote customer adoption.

"VeriSign's payment gateway is a popular and market-proven product that perfectly complements PayPal's existing payment services," said Jeff Jordan, president of PayPal. "We're very excited about the opportunity to extend the benefits of PayPal's services to the VeriSign customer base."

"At eBay, we're always looking for additional tools and technologies to improve the security of our community's accounts and ensure the privacy of information. Two-factor authentication will be another important way customers can shop safely on eBay and pay with PayPal," said Rob Chesnut, senior vice president of trust and safety for eBay.

"The alliance between VeriSign and eBay brings together two leaders in online commerce. eBay's deployment of two-factor authentication will represent one of the largest consumer authentication deployments in the industry," said Stratton Sclavos, chairman and chief executive officer, VeriSign.

PayPal will pay approximately $370 million to purchase VeriSign's payment gateway business, payable in cash and/or eBay stock. Including synergies with PayPal's merchant services business, the payment gateway business is expected to generate an incremental $100 million of revenue at a 20 percent pro forma operating margin in 2006.

VeriSign will provide financial guidance regarding the transaction and its impact to future guidance upon closing.

VeriSign, Inc. (www.verisign.com), operates intelligent infrastructure services that enable and protect billions of interactions every day across the world's voice and data networks. Additional news and information about the company is available at www.VeriSign.com.

Founded in 1998, PayPal, an eBay company, enables any individual or business with an email address to send and receive payments online securely, easily and quickly.